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Moving money to another Roth IRA


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10 replies to this topic

#1 CarKeys

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Posted 04 January 2008 - 09:52 PM

Hello everyone I have two questions.

1. I opened an Roth IRA in Dec 2006 and now I want to move it to another Roth IRA account, I only have about $1000 dollars in it. When I move the money, will it be counted as 2006 contributions or will it be counted as 2008 contributions?

2. Will the 5-year rule start over again now that I've opened the new Roth IRA account? Or will it still be 5 years from the original account date?

Thanks in advance for your feedback!

#2 John G

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Posted 06 January 2008 - 08:21 PM

You can move a Roth from custodian to custodian at any time. There is no 5 year rule on contributions to a Roth. The custodians should maintain the correct contribution year status.

The BEST way to make such a change is to fill out the paperwork (about 3 pages) at the new custodian, then let them handle it. You will never touch a check. There will be no 60 day limit on getting the process done.

Note, the old custodian may charge you a fee for closing the account. Some receiving custodians will pay you the fee, although they often don't want to deposit it into your Roth as that would be considered a contribution. You need to ask.

You do not need to change custodians just because you might be moving. This is a small account... I hope you will find a way to build it up in the future.

#3 masteff

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Posted 07 January 2008 - 10:45 AM

To add to John's answer...

What you're discussing is called a rollover. A rollover does not count as a particular year (e.g. 2006 or 2008). It's just a rollover distribution in the old account and a rollover contribution in the new account.

On your tax return, you won't report it as new contributions. Instead, you'll report the gross amount on line 15 with the word "rollover" written in (see the instructions for form 1040 learn more http://www.irs.gov/p...pdf/i1040gi.pdf ).
Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

#4 Appleby

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Posted 07 January 2008 - 11:19 AM

Hi masteff,

He may actually want to avoid the rollover method and do a transfer instead.

The transfer has no time limit ( such s the 60-day limit that applies to rollovers), and it has no number of occurrence limit, such as the once per 12-month that applies to a rollover.

I think John was referring to a transfer.

Rollover defined here http://www.retiremen...ontribution.htm
Transfer defined here http://www.retiremen...om/Transfer.htm

#5 masteff

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Posted 07 January 2008 - 11:40 AM

Hi masteff,

He may actually want to avoid the rollover method and do a transfer instead.

The transfer has no time limit ( such s the 60-day limit that applies to rollovers), and it has no number of occurrence limit, such as the once per 12-month that applies to a rollover.

I think John was referring to a transfer.

Rollover defined here http://www.retiremen...ontribution.htm
Transfer defined here http://www.retiremen...om/Transfer.htm

I won't confuse the issue by going back to edit my previous post but I do take the point that on the IRA side of things, it's a "transfer" and not a "direct rollover". But my overal point is still the same: to answer CarKeys question #1, it's not counted as a new contribution for 2008. IRS publication 590 starting at page 21 has discussion http://www.irs.gov/p...rs-pdf/p590.pdf
Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

#6 allancoleman

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Posted 07 January 2008 - 07:23 PM

I have done several Roth to Roth , institute to institute , transfers as Appleby suggested from Schwab ( two of them ) and Fidelity ( one ) to Vanguard the last couple of years . They are very easy and you can do it online and never speak to either custodian if you don't want to . The whole process took generally five to six weeks . Just make sure you have your printer hooked up if you're transfering the money to Vanguard as I did cause the next thing you know the computer prompt asks you to print out your transfer application , sign it and sent it to Vanguard at their Valley Forge maling address and wait for your various email confirmations that they received your signed transfer paperwork and will follow up with the details of what your old Roth custodian is or ain't doing regarding your Roth transfer . I have yet to talk to Vanguard about anything so far . Piece of cake . :shades:

Edited by allancoleman, 07 January 2008 - 07:26 PM.


#7 John G

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Posted 08 January 2008 - 12:31 AM

All good points....

While custodian to custodian transfers are easy and almost automatic, the tax payer needs to pay attention to monthly statements to ensure that the transaction was done correctly....on time, the right amounts, posted to the correct year, etc.

#8 razorslug

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Posted 16 February 2008 - 02:00 PM

allancoleman,
Can you help me out al ittle here. I opened a Roth IRA with Fidelity last year. (2007) I maxed it out and most of my funds are invested in three stocks. I want to transfer the Roth IRA to another institution. What are the fees from Fidelity for tranferring my account. Should I go ahead and liquidate the stocks and just transfer the money? (even though I will be charged $20 to sell, so $60 total). Thanks

#9 allancoleman

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Posted 17 February 2008 - 11:58 AM

Razorslug ,

Fidelity changed me a $50 dollar fee to close my Roth account with them when Vanguard requested that my Roth account at Fidelity be transferred to my Vanguard Roth account . I sold out my Fidelity Magellan mutual fund at Fidelity and moved my Fidelity Roth account to cash , a money market , to ease the transfer process and so that I couild pick the level that I wanted my invested positions to be sold and not leave it up to the custodian .

Schwab changed me a similar $50 dollar account closing fee . In the instance of my first Schwab , institute to institute , transfer to Vanguard , I did not specify that my Schwab Roth account be closed entirely upon the transfer to Vanguard and several thousand dollars was left in my Schwab Roth account . I took care of that remaining amount in my Schwab Roth account the following tax year by my second Roth to Roth transfer to Vanguard . Now I no longer have a Roth account at Schwab .

In the instance of my Fidelity Roth account transfer to Vanguard , I stipulated to Fidelity on the phone that I wanted my Fidelity Roth account closed in it's entireity and that no money be left in that account . I've learned to indicate on your transfer request to state that you want your other Roth account closed in it's entireity and it will happen . Because of my experience with Fidelity I would do business with Fidelity again in the future . Because of my experience with Schwab , I don't intend to do further business with Schwab in the future and will close my remaining Schwab IRA account with withdrawals in the future and may close my Schwab one account I have left there too . Others experience may vary .

I have yet to talk to Vanguard on the phone about these three Roth to Roth transfers or anything else for that matter and expect to do another Roth conversion this year too using the new IRS rule change that allows Roth conversion straight from a 401(k) to a Roth account without the intermediate 401(k) to IRA rollover process that was required in the past to get money from a 401(k) to a Roth account . I was surprised how easy it is to get things done on line without picking up a phone and dealing with folks that sometimes don't always inform you of the correct information . If you decide to do business with Vanguard , just make sure you have your printer hooked up to your computer because at the end of your application that only takes a few minutes , you'll be asked to print out your paperwork , sign it , and mail it off to Vanguard . After that , Vanguard will inform you via their very efficient internal account email system of the where your money is in the transfer process and when it's all finally completed . At that time you'll see the actual dollar amount show up in your Vanguard Roth account .

Edited by allancoleman, 18 February 2008 - 09:43 AM.


#10 John G

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Posted 18 February 2008 - 10:13 AM

You can do a custodian to custodian transfer at anytime. You can elect to transfer all or just part of your account. You can elect to transfer assets (stocks, bonds, mutual fund shares) or selective assets or all/some transfered as cash.

Many custodians charge an exit fee. Some brokerages/fund families will refund these fees if you ask. Generally the exit fees are not deposited in your Roth as this would be a contribution. You may be able to pay exit fees by check to avoid a reduction in your Roth, but I have never known anyone that tried this.

I am curious as to why so many folks are switching custodians. You surely don't have to do this if you move. You are allowed to have more than one IRA or Roth account. Frankly, in my experience, the customer service and "error" rates at most of brokers and fund families is about the same and that over time the number of investment choices vastly exceeds what most folks need to consider.

#11 allancoleman

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Posted 18 February 2008 - 10:42 AM

Schwab would not give me the Admiral class GNMA funds that I wanted in my Roth account with them , John . And after attempting to work with Schwab for several years on being able to obtain those Admiral class GNMA shares and the nav prices of GNMAs being as low as they were the summers of 2006 and 2007 allowing me that purchase below $10.00 a share price and my expectation of money market yields dropping , I had no other option except to transfer my Roth accounts From Schwab and Fidelity to Vanguard . In addition , my transfer and combination of my Roth accounts from Schwab and Fidelity to Vanguard has put me very close to Vanguard's Flagship status in that Roth account and I expect to reach that designation this year with those Roth earnings and my next very small Roth conversion that I expect to do this tax calendar year using the IRS's new rule change allowing Roth conversions straight from a 401(k) to a Roth account . This rule change has allowed me to close both my IRAs I was using as a conduit to get money from my 401(k) to my Roths in the past .

My Roth conversion dollar amount has to be very small this year , John , because I want to take advantage of the new IRS tax code change of zero capital gains this tax year if I stay in the 15% income tax bracket that I do not expect to be available in future tax years with a possible new administration change with the next election and I intend to sell my company ESOP stock that I converted to common stock and paid income taxes on when I retired to 2000 and have had in my personal Schwab brokerage account since that time . In the past , my Roth conversions put me in the 25% marginal tax bracket .

I also expect to have to close that Schwab One personal brokerage account , John , in the future because my local Schwab office is threatening to close that account because of my transfer of money to Vanguard in my Roth account with Schwab brings my total dollar accounts amount with Schwab down to where I may no longer would qualify for Schwab's municipal tax free money market sweep account that I am presently using to write myself checks for my living expenses . No matter though because Vanguard has an excellent tax free money market sweep fund that actually pays more than my present Schwab One account that I'll probably open in the future for that similar purpose .

Edited by allancoleman, 18 February 2008 - 11:53 AM.